Default drives homes sell- off

THE pain of arguably North Queensland’s worst recession in living memory is playing out in mortgagee- in- possession sales in the housing market.

While business confidence and the economy is recovering, the delayed effect of personal insolvencies and bankruptcies mean the peak of mortgagee sales have only just been recorded.

According to figures provided by property consultancy firm Herron Todd White, the worst- affected city has been Mount Isa, where mortgagee sales reached a whopping 23.1 per cent of residential turnover in 2016- 17.

Mount Isa has been followed by Mackay, where mortgagee sales hit 13.6 per cent and Townsville 6 per cent during the past year.

In Cairns, where mortgagee sales peaked at 7 per cent after its downturn in 2011- 12, the figure has now dropped back to 1.3 per cent.

HTW research director Rick Carr said the high proportion of mortgagee sales in Mount Isa, Mackay and Townsville reflected the savage mining bust and loss of thousands of jobs when commodity prices tanked in 2015.

For Townsville, it culminated in the closure of Clive Palmer’s Yabulu nickel refinery in early 2016 and the loss of thousands of direct and indirect jobs.

“Mortgagee sales normally peak about one to two years after their causative economic shock,” Mr Carr said.

“This is highlighted by Cairns where mortgagee sales peaked at 7 per cent of the market in 2011- 12 following its own post- GFC economic shock of 2008 to 2010.

“It has subsequently dissipated as the impact has worked through the market.”

Mr Carr said the same prognosis could be expected for Townsville.

“Mortgagee sales are likely to be now reaching their peak following the 2013 to 2016 economic shock and will dissipate again like they did in Cairns over the coming two to three years,” Mr Carr said.

Mortgagee sales occur where a borrower goes into default on mortgage payments and the bank takes possession of the property and sells up to recover its debt.

Mr Carr said mortgagee sales put downward pressure on prices and caused other vendors to withdraw their property from sale.

This was now showing up in lower market listings in Townsville.

Townsville’s median house price has slumped about 11 per cent in the past two years but Mr Carr cautioned that this did not necessarily mean all home values had slid.

According to HTW, Mount Isa median house values have crashed 36 per cent to about $ 240,000 since 2013, while at Mackay they have fallen 28 per cent to $ 310,000 during the same period. Values in the Mount Isa, Mackay and Townsville markets now were relatively stable, he said.